NPA Future-Oriented Financial Statements

Northern Pipeline Agency
Future-oriented Statement of Financial Position (Unaudited)
As at March 31
  Estimated Results
20141
Planned Results
2015
Expenses    
Salaries and employee benefits $1,008,331 $343,675
Professional and special services 147,461 285,400
Transportation and communication 15,615 59,925
Rentals 49,561 35,525
Small equipment - 100
Utilities, Materials, Supplies 1,078 5,285
Information 1,171 1,100
Acquisition of machinery and equipment - 8,990
Amortization 4,437 3,381
Transfer payment - 10,000
Total Recoverable Expenses 1,227,654 753,381
Services provided without charge by other government departments (note 6) 5,100 5,100
Revenues    
Regulatory Revenue 1,227,654 753,381
Revenue earned on behalf of government (1,227,654) (753,381)
Total Revenues 0 0
Net cost of operations $1,232,754 $758,481

1 Information for the year ending March 31, 2014 includes actual amounts from April 1,
2013 to December 31, 2013.

The accompanying notes form an integral part of the Future-oriented Statement of Operations.

1. Methodology and assumptions

The Future-Oriented Statement of Operations has been prepared on the basis of government priorities and the plans of the Agency as described in the Northern Pipeline Agency Report on Plans and Prioritiesi.

The main assumptions are as follows:

  1. The Agency's activities are as reflected in 2013-14 authorities and 2014-15 Main Estimates.
  2. Expenses and revenues, including the determination of amounts internal and external to the government, are based on historical experience, known information and expert opinion of people with appropriate knowledge of the Agency’s activities.

On March 30, 2012, TransCanada and the major North Slope gas producers (ExxonMobile, BP and ConocoPhillips) announced that they had agreed to work together to explore the feasibility of a project alternative that would include a natural gas pipeline from Prudhoe Bay to a Liquefied Natural Gas (LNG) facility near tidewater in south central Alaska. On May 2, 2012, the State of Alaska approved an amendment to TransCanada’s AGIA Project Plan to allow it to undertake work on this project alternative under the AGIA framework.

On January 15, 2014, Alaskan Governor Parnell announced that the State had signed an agreement with the major North Slope gas producers and TransCanada outlining a roadmap for the proposed all-Alaska LNG export project studies to proceed. The State and TransCanada have agreed to terminate the existing licensing and funding agreement they signed in 2008 and have signed a new memorandum of understanding setting out TransCanada’s role in the midstream portion of the LNG project. Despite this milestone, there is continued uncertainty regarding the timeline of a decision of which project – if any – (either LNG or AHGP) would proceed.

2. Variations and Changes to the Forecast Financial Information

While every attempt has been made to accurately forecast final results for the remainder of 2013-14 and for 2014-15, the actual results achieved for both years are likely to vary from the forecast information presented; this variation could be material.

In preparing this Future-Oriented Statement of Operations, the Agency has made estimates and assumptions concerning the future. These estimates and assumptions may differ from the subsequent actual results. Estimates and assumptions are continually evaluated and are based on historical experience and other factors, including expectations of future events believed to be reasonable under the circumstances.

As the Agency regulates a single project, changes in the project proponent's plans and activities could lead to material differences between the Future-Oriented statement of Operations and the Agency’s annual financial statements.

Once the Agency’s 2014-15 Report on Plans and Priorities is presented, the Agency will not be updating the forecasts for any changes to appropriations or forecast financial information made in ensuing supplementary estimates. Variances will be explained in the Departmental Performance Report.

3. Summary of Significant Accounting Policies

The Future-Oriented Statement of Operations has been prepared in accordance with the Treasury Board accounting policies in effect for the 2013-14 fiscal year. These accounting policies, stated below, are consistent with Canadian generally accepted accounting principles for the public sector. The presentation and results using the stated accounting policies do not result in any significant differences from Canadian generally accepted accounting principles.

Significant accounting policies are as follows:

a) Revenue/Deferred revenue is recognized on an accrual basis:

Revenues from regulatory fees recovered from Foothills are recognized in the year in which the expenses were incurred.

Revenues that have been received but not yet earned are recorded as deferred revenues. Deferred revenues represent the accumulation of excess billings over the actual expenses.

Revenues that are non-respendable are not available to discharge the Agency’s liabilities. While the Commissioner is expected to maintain accounting control,
he has no authority regarding the disposition of non-respendable revenues. As a result, non-respendable revenues are considered to be earned on behalf of the Government of Canada and are therefore presented in reduction of the entity’s gross revenues.

b) Expenses:

Expenses are recorded on an accrual basis. Expenses for the Department operations are recorded when goods are received or services are rendered including services provided without charges. Vacation pay and compensatory leave are accrued and expenses are recorded as the benefits are earned by employees under their respective terms of employment.

Transfer payments are recorded as expenses when the recipient has met the eligibility criteria or fulfilled the terms of a contractual transfer agreement or, in the case of transactions which do not form part of an existing program, when the Government announces a decision to make a non-recurring transfer, provided the enabling legislation or authorization for payment receives parliamentary approval prior to the completion of the financial statement.  Transfer payments that become repayable as a result of conditions specified in the contribution agreement that have come into being are recorded as a reduction to transfer payment expense and as a receivable.

Expenses also include provisions to reflect changes in the value of assets, including provisions for bad debt on accounts receivable, provision for valuation on loans, investments and advances and inventory obsolescence or liabilities, including contingent liabilities and environmental liabilities to the extent the future event is likely to occur and a reasonable estimate can be made.

Expenses also include amortization of tangible capital assets which are capitalized at their acquisition cost.  Amortization of tangible capital assets is done on a straight-line basis over the estimated useful life of the asset. 

4. Parliamentary Authorities

The Government of Canada funds the expenses of the Agency through Parliamentary appropriations. Items recognized in the Future-Oriented Statement of Operations in one year may be funded through Parliamentary appropriations in prior, current or future years. Accordingly, the Agency has different net results of operations for the year on a government funding basis than on an accrual accounting basis. The differences are reconciled in the following tables:

(a) Reconciliation of net cost of operations to requested authorities:
  Estimated Results 2014 Planned Results 2015
Net cost of operations $1,232,754 $758,481
 
Adjustments for items affecting net cost of
operation but not affecting authorities:
Add (Less):
Services received without charge by other government departments (5,100) (5100)
Amortization of tangible capital assets (4,437) (3,381)
Forecast authorities available $1,223,217 $750,000
(b) Authorities requested:
  Estimated Results 2014 Planned Results 2015
Vote 30 - Program expenditures $3,003,000 $701,325
Vote 25 - Transfer from Vote 25 - -
Statutory amounts 120,930 48,675
Lapsed - Operating (1,900,713)  
Forecast authorities available $1,223,217 $750,000

Authorities presented reflect current forecasts of statutory items, approved initiatives included and expected to be included in Estimates documents and, when reasonable estimates can be made, estimates of amounts to be allocated from Treasury Board central votes.

Endnotes

i. NPA Report on Plans and Priorities, http://npa.gc.ca/publications/69